ISO admits responsibility, Duke says

CHARLOTTE, N.C. (CBS.MW) -- California's power grid manager admitted it was responsible for fluctuations in production at a San Diego electricity plant operated by Duke Energy, a top executive for the generator company said Monday.

Jeff Stokes, executive vice president of Duke's North American operations, said the California Independent System Operator's own review of its records showed that Duke
DUK, -0.51%
was following state orders to help balance the state's power grid. Duke Energy has disputed allegations by former employees that it manipulated output at its South Bay power plant in California to cause the price of power to spike on the wholesale market.

He disclosed the findings in a conference call.

Stokes said that on the days in question, Jan. 16-18, the ISO bought stand-by capacity from its South Bay power plant to help the grid operator meet changes in supply and demand.

Duke to offset receivables

Duke Energy said it will offset its receivables due from the California's power grid and power exchange operators for electricity above the proxy price determined by federal energy regulators. In a June 19 order, the Federal Energy Regulatory Committee required that Duke offset any invoiced amounts above the proxy price of $273 per megawatt it set for electricity in January. Duke's invoiced amounts above that price totaled $17.8 million for that month. Duke will offset receivables due from the state for electricity sold in January and February by about $20 million. Prices for electricity sold in March, April and May don't require offsets based on the criteria used by FERC to determine the need for offsets, or refunds during those months, Duke said. The Charlotte, N.C.-based company said it would also offset about $2.1 million for prices invoiced above the FERC proxy price of $430 per megawatt for February.

Oil market readies for OPEC decision

Members of the Organization of Petroleum Exporting Countries have a full agenda of issues to consider this week, including indications of slowing crude demand, Iraq's halt on exports and an 8 percent drop in oil futures prices over the last month.

After deciding last month to keep its production quotas unchanged at 24.2 million barrels per day, the cartel is set to make another output-target announcement on Tuesday. But it's been nearly one month since Iraq put a halt on its worldwide exports of about 2.2 million barrels per day and inventories of crude and gasoline have been on the rise, prompting a $2 fall in crude prices and a nearly 16 percent drop in gasoline prices in the course of the past month. See full story.

Group sees manipulation of gasoline prices

A wave of oil industry mega-mergers has resulted in shuttered gas stations and refineries, contributing to market manipulation that resulted in recent gasoline price rises, a consumer advocacy group charged in a study released Monday. "The administration and Congress should focus their oil-based energy policy on increasing competition, expanding refinery and storage capacity, and boosting the fuel efficiency of motor vehicles," said Mark Cooper, director of research for the Consumer Federation of America and author of the study.

U.S. offers Gulf oil leases

The United States will offer leases opening around 1.5 million acres in the Gulf of Mexico to new oil and natural gas exploration, Interior Secretary Gale Norton announced.

The area, known formally as Lease Sale 181, was scaled from the initial 5.9 million acres proposed in 1997 by the Clinton administration after consultations with former Florida Gov. Lawton Chiles and officials from other states. The sales were delayed amid objections by the tourist industry and environmentalists.

UBS Warburg likes electric utility stocks

UBS Warburg analyst Barry Abramson continues to recommend an "overweighting" in the electric utility group, despite a 13 percent correction in the stocks over the past two months.

"It appears to us that the electric group is going to report another strong earnings quarter at a time when many other stock market groups continue to report weak results," he said in a research note.

Calif. ISO issues emergency power alert

California's power grid operator warned that operating reserves would likely fall below 5 percent of what's needed to keep the grid stable. High temperatures throughout the state, as well as the loss of more than 4,000 megawatts of power due to planned and unplanned unit outages, have tightened supplies, according to data from the Independent System Operator. A single megawatt can provide enough power for 750 homes. The ISO expects peak demand to top 40,000 megawatts around 4 p.m. to 5 p.m. Pacific time. Available electricity generation was pegged at just below 43,000 megawatts.

California starts up gas-fired plant

California unveiled a 540-megawatt power plant in Sutter County - the largest power plant licensed by the state since 1976. The Sutter Energy Center will supply enough energy to power 540,000 homes, Gov. Gray Davis said. Last week the state saw its first major power plant to come online in 13 years and next week, the governor will open the 540-megawatt Los Medanos power plant in Pittsburg.

The Washington Post corrects Greenspan story

Alan Greenspan's remarks on energy last week referred to the need for private long-term contracts for the sale of power or office space, and did not address the issue of price caps for power, other price controls or the administration's position on them, the Washington Post said Monday. An article published Friday by the newspaper said the Fed chairman disagreed sharply with the Bush administration's position that capping spot prices for electricity in California would discourage construction of new power plants.

Oil falls as Iraq likely to resume exports

Crude futures dropped back under $26 a barrel Monday on expectations that an informal United Nations agreement to roll over a humanitarian program with Iraq will prompt the resumption of oil exports which have been halted for nearly a month.

The U.N. informally agreed to roll over its oil-for-food program with Iraq for at least three months, Bridge News reported. "This solidifies the idea that OPEC will not raise production at the meeting Tuesday," said Jeff Mokychic, BridgetonGlobal.com's head analyst

BP's second-quarter trading update

BP, one of the largest integrated oil companies in the world, said it expects total production of oil and gas to climb 4 percent from the second quarter of last year but decline 3 percent from the preceding quarter as the price of Brent crude rose during the second quarter. BP
BP, -0.55%
said gas and power marketing and trading has remained strong, and while the refining and marketing unit has experienced volatility, second-quarter retail marketing margins should improve by 20 percent compared to the first quarter on weakening wholesale prices. Pressure on chemical demand and margins has persisted through the second quarter, BP said.

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